Amid market and economic challenges, businesses resort to price wars to remain competitive, jeopardizing their survival. Simultaneously, conventional demand-generation marketing approaches are losing efficacy in the digital age. In this market predicament, Generative AI emerges as a potential remedy, enabling personalized and scalable customer interactions to tackle the issue.
Resolving the Predicament of Price Wars
The problem of price wars arises due to economic factors such as recession, fears of a U.S. default, and inflation struggles. These price reductions often fail to significantly impact sales volumes, especially when competitors adopt the same strategy. Engaging in price wars can be an ugly and painful experience for businesses, typically triggered by leaders’ lack of marketing knowledge.
They impulsively cut prices to boost sales and reduce inventory, without considering the consequences. However, they fail to realize that their competitors will respond with their own price reductions, leading to a continuous cycle of decreasing prices until reaching unsustainable levels, risking the survival of all involved parties. It is crucial to avoid initiating a price war, as unless a company has a substantial cost advantage, the risk of not surviving such a conflict is genuine.
Generative AI May Be the Answer
Initially, many believed that Facebook and social media would provide the solution to marketing challenges by delivering personalized and effective ads based on user data. However, widespread ad fraud on Facebook has eroded trust in their advertising platform. Another option, direct marketing through call centers, can be costly and provoke customer dissatisfaction if outsourced to low-cost regions. But now, there’s a powerful alternative in Generative AI.
Generative AI has the capability to mimic human interaction convincingly, building relationships with customers on a large scale. By training the AI with top sales techniques and emphasizing value and engagement, businesses can create a positive customer experience. Building upon existing customer relationships is particularly effective, offering free services or valuable information to deepen connections before introducing new offers.
With proper funding and customer profiling, Generative AI can address marketing issues effectively. The technology also enables valuable feedback, market testing, and early detection of potential product problems, safeguarding a brand’s reputation. Generative AI indeed represents the future of marketing, and in light of current challenges, its implementation may be the key to success right now.
Several factors influence the market demand for a product:
Product Price: In the long run, the price of a product becomes the primary determinant of market demand, following the law of demand. When the price decreases, the quantity demanded tends to increase, and vice versa.
Price of Related Goods: Changes in the prices of related goods, whether substitutes or complements, can also impact market demand. When two goods are substitutes, a change in the price of one affects the demand for the other in the same direction.
Consumer Income: Consumer income plays a vital role in determining the quantity demanded of a product. Different types of goods are affected differently by changes in consumer income. For example, essential goods show a limited increase in demand with rising income, while inferior goods experience a decrease in demand.
Consumers’ Choices and Preferences: Tastes and preferences of consumers significantly influence the demand for a product. Factors like lifestyle, culture, age, gender, and social customs contribute to consumer preferences.
Advertising Expenses: Effective advertising can stimulate demand by informing consumers about the product, highlighting its advantages over competitors, influencing consumer choices, and setting trends.
Consumers’ Expectations: Short-term expectations about income, future prices, and supply conditions can impact present demand for a product.
Performance Effect (Bandwagon Effect): Consumer decisions to purchase certain products may be influenced by desires to showcase affluence, social status, and competitiveness, especially when the products are fashionable or popular.
Consumer-Credit Facility: The availability of credit options can encourage consumers to make purchases they might not have made otherwise, leading to increased demand.
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